How do you develop good judgement in regards to your investments?
How to keep a cool head when investing is such an emotional endevour?
How to control the subconscious when it wants to act on impulses triggered by fear and greed?
To be a good investor of crypto, it is a good idea to develop a strategy based on technical analysis that has stood the test of time.
There are several factors investors take into account to predict price action.
How to spot a Golden Cross on the Chart
A Golden cross can be seen on the chart when the price action indicates a bull trend. The opposite of a Golden cross is when the price action indicates a bear trend, and it’s called a Death cross.
These crosses are made by lines created by moving averages over different time periods cross over each other on a candlestick chart.
A moving average is a price average over a certain period of time. When you change the time frame, the moving average changes as well. A 200-day moving average will lag behind the current price action. A 7-day moving average will respond faster to a price action due to a shorter time average. It is common to use a 200-day moving average and a 50 day moving average for medium to long term investors.
If the 50-day moving average is below the 200 day moving average, it speaks of a bearish trend in the market. But when the 50-day moving trend starts moving up towards the 200-day moving average and crosses to go above the 200-day moving average, it is called a Golden cross. This indicates a Bull run in the market.
Binance exchange has a great candlestick chart and you can set the time limits on the moving averages yourself as well as the time period you want to examine.
Are moving averages enough to predict price action?
No, there are other factors that must also be considered. Always look at trading volume. An upward or downward trend in the market might not indicate a shift in the bear/bull trend if trading volume is low.
If you are a day trader, then the 200/50 day moving average might be lagging too far behind in price action to predict current trends. Popular moving averages for a day trader is 8/20.
In Binance, you can choose between Moving average (MA), Exponential moving average (EMA), and Weighted moving average (WMA). You can learn more about the different Moving Averages here.
What is RSI in Trading?
In Binance you can also see if your current cryptocurrency is under or overpriced. This is called the Relative Strength Index (RSI). RSI below 30 indicates the crypto is oversold and you can expect prices to rise. RSI above 70 means the crypto is overbought and you can expect prices to drop.
Altcoins and Bitcoin relationship
If you are buying and selling Altcoins (alternative crypto to Bitcoin), then have a look at how Bitcoin is doing, because Altcoin prices tend to follow Bitcoin. Altcoins tend to rise and fall with the price of Bitcoin.
Altcoins do best when Bitcoin rises slowly over time, or when Bitcoin trades sideway.
To be successful in buying/selling Altcoins, it is a good idea to study the tokenomics of the particular Altcoin.
There are many factors to consider when buying/selling crypto. It is always recommended to do vigorous research into the crypto market before participating in trading.